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Market Plus: Jan 02, 2009: Virgil Robinson, Pioneer Hi-Bred International

posted on January 2, 2009


Market Plus: Jan 02, 2009: Virgil Robinson, Pioneer Hi-Bred International Pearson: Welcome to our January 2nd, 2009 version of Market Plus, the very first Market Plus for 2009. With us this week one of our long-term market analysts, Virgil Robinson. Virgil, good to have you with us. I liked your theme concept on the show a lot because I think there is a lot to build on that theme. December was a big month and you talk about the fact you're a bar chartist. Explain what that is for people out there that maybe don't understand the technical side of tracking commodities.

Robinson: It's just a series of monthly entries where you track the high of the month, the low of the month and the settlement for the month in comparison to those previous to it. And as mentioned the behavior in quite a series of agricultural commodities, wheat, rough rice, corn, soybeans, soybean meal all put in what is known as a classic reversal, price reversal or outside month which is kind of an exclamation point given the price declines that all of those commodities have experienced. So, if this method serves us well it would suggest then that we have seen our lows in those aforementioned commodities and can therefore look forward to some price improvement and because of the environment and how difficult the environment currently is I can only preface this statement with over the course of time. We could see some what is also known to a bar chartist as retracement from the high of the move where that high was established to the low of this particular leg in the market. There are common measurements of retracement to include 50%, half of the move from low to high and two-thirds. So, the markets, if we are to accept that explanation at face value, are positioned then for some price improvement over the course of 2009.

Pearson: Years ago my friend Loren Kruse wrote a book called "Charting for Profit" and I remember him discussing those kinds of things. It seems like we'll fall out of favor with following certain things and chartists kind of fall out of favor when we had this huge outside move with crude oil and so forth and now as we look back we look at more fundamentals I think charting is probably where we shouldn't have left. That is a real legitimate form of trying to interpret what's happening with the market.

Robinson: It's a method of forecasting that is tried and in my opinion relatively true over the course of many, many years which would encompass, of course, various business cycles and various cycles, the likes of which we have encountered perhaps here. To your point regarding the correlation or the relationship between crude, for example, and corn, wheat, rice and other coarse grains I did not see and the crude oil market did not develop the same type of pattern I referred to here in those other commodities. So, perhaps that is the first sign, at least visible sign, in this methodology that would suggest we are decoupling one from the other. So, again, we may have to kind of divorce ourselves at some point in time with what has become kind of a common relationship or a common point of conversation, crude, corn, soybean oil and soybeans. So, perhaps we're in the process of doing that with this observation.

Pearson: So, review your theme. It works almost in all the commodities we track on the show including cotton.

Robinson: Again, it's not a science but over the course of the last many years -- and I've been trying to practice this for over 30 years -- it has proven to be more accurate than not. So, it kind of leads me to the idea I'll be looking for opportunities to create positions based on that methodology and I'll obviously be trying in this case to be picking bottoms, bottom fishing, and the method that I'll choose is probably going to be some type of option strategy or option combination strategy in my effort to do that.

Pearson: So, you've talked about minimum pricing for years, minimum price strategies and it has served people very well over the long-term. This may be one of those years to take advantage of this hopefully trend that is hopefully going to be with us for a while, again, to follow that theme of yours, hopefully we'll see this roll here for a couple of quarters.

Robinson: And we've got some people that traditionally in the month of January -- if you look back over the course of the last many years in the state of Iowa as well as any agricultural producing state -- January is one of those months where people make sales or price what is unpriced in their effort to generate cash. So, we have that month approaching us. So, it's probably going to be kind of a choppy affair through the month of January which would lend itself well to looking for opportunities to selectively pick those areas option wise where you employ a simple call strategy or a simple put strategy to create minimum price or these vertical puts and vertical call combinations that are a little cheaper but basically give you the same type of opportunity.

Pearson: Virgil, thank you so much for all your analyses throughout the year, throughout 2008. We wish you all the best and look forward to working with you again in 2009. And for all the folks out there who come in and click into our Market Plus Web site, if you'd like to catch our show or have this program on your local public television affiliate what I would encourage you to do is to pick up the phone and call your local PBS station, that way you can catch the entire program each week right there on your television in addition to, of course, catching up on Market Plus here at our Web site. So, call your local PBS programmer and say we want Market to Market in our town. For Virgil Robinson and for all of us here at Market to Market, I'm Mark Pearson. Have a great week and a Happy New Year of 2009.


Tags: agriculture commodity prices markets news